SACRAMENTO, Calif.—California Gov. Arnold Schwarzenegger said Thursday that he will postpone a ballot initiative aimed at replacing the defined benefit pension plans covering California’s public employees with defined contribution plans.

Reducing the state’s expenses by revamping its public pension system has been part of the governor’s agenda for improving state finances. California now is contributing about $2.6 billion a year to its pension program, up from $160 million in 2000, and the costs are out of control, the governor said.

His supporters had already gathered 400,000 signatures to put the issue to voters this fall. But on Thursday, the governor said firefighters and law enforcement officials pressed him to reconsider because the initiative, according to a state analysis, would erode their death and disability benefits.

Gov. Schwarzenegger said he will instead meet with legislators in hopes of crafting compromise legislation. But if an agreement is not reached, “our pension reform proposal will go to the ballot in June 2006,” the governor said. “And we will win because that is what the people demand.”

In the past, Americans have shrugged off warnings about the impending deficit and debt crises. Many Americans are too focused on today and aren’t thinking enough about tomorrow. As Walter Shapiro pointed out in a recent column in USA Today, low interest rates and modest inflation give many Americans a false sense of security. These false perceptions are reinforced by the government’s financial statements, which currently do not provide a full and fair view of our nation’s current financial condition and long-term outlook. The simple truth is that our nation’s financial condition is much worse than advertised. In addition, due largely to the looming retirement of the baby boomers, surging health care costs, and relatively low federal revenues as a percentage of the economy, we now face decades of red ink.

The first point involves conceptual difficulties in measuring savings. The traditional product-account (or NIPA) measure of saving in the national income accounts is the difference between current income and consumption. The NIPA definition contrasts with the asset-account definition, which is (or should be) the change in real net wealth.

The difference between the production account and the asset-account definitions became particularly large during the asset bubble of the late 1990s. Data compiled by Gale and Sabelhaus indicate that for the 1990–99 period, the personal savings rate was a meager 3 percent of income using the product-account definition and a healthy 17 percent using the asset-account definition.A similar calculation by Lusardi, Skinner, and Venti found the net asset-account savings rate for 1999 was 45 percent while the NIPA savings rate was 3 percent.7 An integrated set of accounts, with a reconciliation table for different concepts, would help policymakers and analysts keep the different concepts and numbers clearly in mind.

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When one consumes as much data (articles, books, etc.) as I do, it becomes clear that things are pretty bad, but not as bad as they seem. While this may sound counter-intuitive, it really isn't.

It is only a matter of making the proper decisions.

There are three main American entitlements, 2 national, and one more state and local based. They are Social Security, Medicare (We need to throw Medicaid in here as well), and Public Education.

All three are built up on 1930s models. All three were "destroyed" when the 1960s turned the US toward a Eurostyle Welfare state. All three are unsustainable in their present form, and must be radically reformed (and CUT in the case of Medicare).

This isn't left or right argumentation. It is a force of nature. For proof, we only need look to Europe, which is taxing and spending itself out of existence.

Regardless, I will be posting a great deal on government finance & spending in the next few weeks. We have great opportunity RIGHT NOW to set America on a very sound course, as long as we are bold.